MISSISSIPPI LEGISLATURE
2006 Regular Session
To: Finance
By: Senator(s) Jackson (11th), Thomas
AN ACT TO ESTABLISH AN INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAM IN THE MISSISSIPPI DEVELOPMENT AUTHORITY; TO AUTHORIZE CERTAIN PERSONS WITH LOW INCOMES TO ENTER INTO AGREEMENTS DEVELOPED WITH A FIDUCIARY ORGANIZATION FOR THE ESTABLISHMENT OF AN INDIVIDUAL DEVELOPMENT ACCOUNT; TO REQUIRE THE AGREEMENT TO PROVIDE FOR THE AMOUNT OF SAVINGS DEPOSITS, MATCH FUND RATES, ASSET GOALS AND FINANCIAL LITERACY EDUCATION CLASSES TO BE COMPLETED, ADDITIONAL TRAINING SPECIFIC TO THE ASSET, AND FINANCIAL COUNSELING THE INDIVIDUAL WILL ATTEND, AS WELL AS OTHER SERVICES DESIGNED TO INCREASE THE FINANCIAL INDEPENDENCE OF THE PERSON; TO PROVIDE THAT THE FUNDS IN THE ACCOUNT SHALL BE MATCHED UNDER CERTAIN CIRCUMSTANCES; TO PROVIDE THAT MONEY MAY BE WITHDRAWN FROM THE ACCOUNT FOR CERTAIN QUALIFIED PURPOSES; TO ALLOW MONEY TO BE WITHDRAWN FROM THE ACCOUNT IN THE EVENT OF CERTAIN EMERGENCIES AND PROVIDE FOR THE REIMBURSEMENT OF THE ACCOUNT IF MONEY IS WITHDRAWN FOR EMERGENCIES; TO REMOVE A PERSON FROM THE PROGRAM IF MONEY IS WITHDRAWN FOR OTHER PURPOSES; TO REQUIRE THE ACCOUNT HOLDER TO FULFILL CERTAIN REQUIREMENTS BEFORE THE WITHDRAWAL OF MONEY FROM THE ACCOUNT; TO PROVIDE THAT MONEY DEPOSITED IN THE ACCOUNT SHALL NOT BE GROSS INCOME FOR INCOME TAX PURPOSES; TO PROVIDE THAT MONEY WITHDRAWN FROM THE ACCOUNT FOR QUALIFIED PURPOSES SHALL NOT BE CONSIDERED GROSS INCOME FOR INCOME TAX PURPOSES; TO PROVIDE FOR THE SELECTION OF FIDUCIARY ORGANIZATIONS TO ADMINISTER THE PROGRAM; TO PROVIDE FOR THE DUTIES OF FINANCIAL INSTITUTIONS HOLDING INDIVIDUAL DEVELOPMENT ACCOUNTS; TO PROVIDE THAT AN ACCOUNT OWNERS SAVINGS AND MATCHING FUNDS SHALL NOT AFFECT HIS OR HER ELIGIBILITY FOR ANY MEANS-TESTED PUBLIC BENEFITS; TO AUTHORIZE AN INCOME TAX CREDIT FOR DONATIONS MADE BY A CHARITABLE DONOR TO THE INDIVIDUAL DEVELOPMENT ACCOUNT FUND OR ON BEHALF OF AN INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAM OR OWNER IN THIS STATE; TO AMEND SECTION 27-7-15, MISSISSIPPI CODE OF 1972, IN CONFORMITY THERETO; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. As used in Sections 1 through 12 of this act:
(a) "Individual development account" means an account established for an eligible individual or family member as part of a qualified individual development account program by an agreement with the following requirements:
(i) The sole owner of the account is the individual or family member for whom the account was created.
(ii) The holder of the account is a qualified financial institution.
(iii) The assets of the account will not be comingled with other property except in a common trust fund or common investment fund.
(iv) Any amount in the account will be paid out only for the purpose of paying the qualified purposes of the account owner, except if it meets the qualifications of an emergency use.
(b) "Eligible individual or family member" means one whose household income is equal to or less than eighty percent (80%) of the median household income for the area or less than two hundred percent (200%) of the federal poverty guidelines, whichever is greater.
(c) "Fiduciary organization" means any nonprofit, fund-raising organization that is exempt from taxation under Section 501(c)(3) of the Internal Revenue Code, as amended, any community development financial institution certified by the Community Development Financial Institution Fund, any credit union chartered under federal or state law, or any Indian tribe as defined in Section 4(12) of the Native American Housing Assistance and Self-Determination Act of 1996 (25 USC 4103(12)), and includes any tribal subsidiary, subdivision or other wholly-owned tribal entity.
(d) "Financial institution" means a bank, trust company, savings bank, building and loan association, savings and loan company or association, or credit union authorized to do business in this state.
(e) "Parallel account" means a separate, parallel account for all matching funds and earnings dedicated to individual development account owners, the sole holder of which is a qualified financial institution, a qualified fiduciary organization or an Indian tribe.
(f) "Authority" means the Mississippi Development Authority.
(g) "Qualified purposes" refers to using the account owner's accumulated savings and matching funds for any of the following uses:
(i) Securing postsecondary education, including, but not limited to, community college courses, courses at a four-year college or university, 529 College Plans, or post-college, graduate courses for the account owner or any member of the account owner's family;
(ii) Securing postsecondary occupational training, including, but not limited to, vocational or trade school training for the account owner or any member of the account owner's family;
(iii) Purchasing a home for the first time;
(iv) Costs for major repairs or improvement to a primary residence;
(v) Business capitalization;
(vi) Purchasing of an automobile necessary to transport account owner or family member to place of employment or education;
(vii) Assistive technology;
(viii) Retirement IRAs;
(ix) Enrollment of the account owner's child in day care to enable the account owner to participate in job training, any work-related activity, or educational program; or
(x) Other activity based on a plan approved by the authority.
(h) "Emergency" includes making payments for necessary medical expenses to avoid eviction of the account owner from the account owner's residence and for necessary living expenses following a loss of income.
(i) "Charitable donor" means a person, business or corporation who contributes to the individual development account fund managed by the authority for the purposes of individual development account programs in this state.
SECTION 2. A person who is determined eligible to become an individual development account owner may enter into an agreement developed with a fiduciary organization for the establishment of an individual development account. The agreement must provide for the amount of savings deposits, the match fund rate, the asset goal, and the financial literacy education classes to be completed, additional training specific to the asset, and financial counseling the individual will attend, as well as other services designed to increase the independence of the person through achievement of the account's approved purpose.
SECTION 3. Once the account owner has saved for a minimum of six (6) months, has reached his or her savings goal and has fulfilled all financial literacy education components, then and only then will the appropriate matching funds be transferred from the parallel account directly to the vendor or service provider.
SECTION 4. (1) If an emergency occurs, an account owner may withdraw all or part of the account owner's deposits to an individual development account with the approval of the fiduciary organization.
(2) The account owner must reimburse his or her individual development account for the amount withdrawn under this section within twelve (12) months after the date of the withdrawal. Failure of an account owner to make a timely reimbursement to the account is grounds for removing the account owner from the individual development account program. Until the reimbursement has been made in full, an account owner may not withdraw any matching funds or accrued interest on matching funds from the account.
(3) If an account owner withdraws money from an individual development account for other than a qualified purpose, the fiduciary organization may remove the account owner from the program.
SECTION 5. Before becoming eligible to draw down matching funds to pay for qualified purposes, individual development account owners must complete a financial literacy education course offered by a qualified financial institution, a qualified fiduciary organization, an Indian tribe or a government entity.
SECTION 6. (1) Deposits to individual development accounts made by the account owner must come from earned income, including, but not limited to, child support payments, Supplemental Security Income (SSI), disability benefits, community service under TANF, AmeriCorps stipends and job training program stipends.
(2) Eligible individuals must be able to certify, if necessary, that their deposits do not exceed their earned income. Therefore, a cap on annual deposits made by the account owner is set at Two Thousand Dollars ($2,000.00).
SECTION 7. Money deposited into individual development accounts shall not be included in gross income for income tax purposes. Any amount withdrawn from a parallel account (matching funds) shall not be includable in an eligible individual's gross income. Money withdrawn from individual development accounts shall only be included in gross income if used for a purpose other than a qualified purpose.
SECTION 8. The authority may select fiduciary organizations through competitive processes. In making the selections, the authority may consider factors, including, but not limited to:
(a) The ability of the fiduciary organization to implement and administer the individual development account program, including the ability to verify account owner eligibility, certify that matching funds are used only for qualified purposes and exercise general fiscal accountability;
(b) The capacity of the fiduciary organization to provide or raise matching funds for the deposits of account owners;
(c) The capacity of the fiduciary organization to provide financial counseling, financial literacy education and training specific to the assets the account owners will be purchasing, and other related services to account owners;
(d) The links the fiduciary organization has to other activities and programs designed to increase the independence of this state's low-income households and individuals through education and training, homeownership, small business capitalization, and other asset building programs; and
(e) The feasibility of the fiduciary organization's program design, including match rates and savings goals, to lead to asset purchase.
SECTION 9. (1) Subject to authority rules, a fiduciary organization has sole authority over, and responsibility for, the administration of individual development accounts. The responsibility of the fiduciary organization extends to all aspects of the account program, including marketing to eligible individuals and families, soliciting matching funds, counseling account owners, providing financial literacy education and conducting required verification and compliance activities. The fiduciary organization may establish program provisions as the organization believes necessary to ensure account owner compliance with Sections 1 through 12 of this act. Notwithstanding any provisions of Sections 1 through 12 of this act to the contrary, a fiduciary organization may establish income limitations for account owners that are lower than the income limitations otherwise established by Sections 1 through 12 of this act.
(2) A fiduciary organization may act in partnership with other entities, including businesses, government agencies, nonprofit organizations, community development corporations, community action programs, housing authorities and congregations, to assist in the fulfillment of fiduciary organization responsibilities under Sections 1 through 12 of this act.
(3) A fiduciary organization may use a reasonable portion of money allocated to the individual development account program for administration, operation and research and evaluation purposes, including, but not limited to, the purchase of data collection software such as Management Information System for Individual Development Accounts (MIS-IDA).
(4) A fiduciary organization selected to administer money directed by the state for individual development account purposes or receiving tax deductible contributions shall provide the authority with an annual report based on regularly collected data of the fiduciary organization's individual development account program activity. The report shall be filed not later than ninety (90) days after the end of the fiscal year of the fiduciary organization. The report shall include, but is not limited to:
(a) The number of individual development accounts administered by the fiduciary organization;
(b) The amount of deposits and matching funds for each account;
(c) The asset purchase goal of each account;
(d) The number of withdrawals made; and
(e) Any other information the authority may require for the purpose of making a return on investment analysis.
(5) The authority shall make all reasonable and necessary rules to ensure the fiduciary organization's compliance with Sections 1 through 12 of this act.
(6) Financial institutions holding individual development accounts shall at a minimum:
(a) Keep the account in the name of the account owner;
(b) Permit deposits to be made in the account;
(c) Require the account to earn a market rate of interest;
(d) Maintain the individual development accounts as fee-free; and
(e) Permit the account owner, after obtaining the written authorization of the fiduciary organization, to withdraw money from the account for any qualified purpose.
SECTION 10. (1) An account owner's savings and matching funds shall not affect his or her eligibility for any means-tested public benefits, including, but not limited to, Medicaid, State Children's Health Insurance Programs, TANF, Food Stamps, Supplemental Security Income, or government-subsidized foster care and adoption payments, child care or housing payments. In addition, savings of up to Ten Thousand Dollars ($10,000.00) in an individual development account shall be disregarded in determining eligibility for federal or state programs based on need.
(2) Funds deposited in individual development accounts shall not be counted as income, assets or resources of the account owner for the purpose of determining financial eligibility for assistance or service pursuant to any federal, federally-assisted, state or municipal program based on need.
SECTION 11. (1) There shall be allowed to each charitable donor, who has had an application for a tax credit approved in accordance with this section, a credit with respect to the income taxes imposed by Chapter 7, Title 27, Mississippi Code of 1972, in an amount equal to fifty percent (50%) of the total monetary contribution paid during such income tax year by a charitable donor to the individual development account fund managed by the authority or on behalf of an individual development account program or owner in this state; however, in no event may:
(a) The aggregate amount of credit claimed by all charitable donors in this state pursuant to this section exceed Four Million Dollars ($4,000,000.00) in any state fiscal year; or
(b) The charitable donor be able to designate an individual development account owner with whom the charitable donor shares a financial interest or familial relationship.
(2) Application for the tax credit created in this section shall be made by the charitable donor to the authority in accordance with rules adopted by the authority and subject to any other limitation set forth in this section. When claiming a tax credit pursuant to this section, a charitable donor shall include proof that its application has been granted in accordance with this section.
(3) If the amount of the tax credit allowed under this section exceeds the amount of the income tax otherwise due on the income of the charitable donor, the amount of the tax credit not used may be carried forward to apply to the charitable donor's subsequent years' tax liability. No tax credit shall be allowed the charitable donor against prior years' tax liability, nor shall it be refundable to the charitable donor.
(4) The tax credits authorized by this section are transferable should a charitable donor decide to sell its tax credits.
(5) The State Tax Commission, in consultation with the authority and the fiduciary organizations, shall promulgate any rules and regulations necessary to implement and administer this section.
SECTION 12. (1) A fiduciary organization selected under Section 8 of this act shall qualify as the recipient of donations made by charitable donors that qualify the donor for a tax credit under Section 11 of this act as long as the fiduciary organization holds the matching funds it receives in a parallel account.
(2) If Assets for Independence Act (AFIA) funds, or other similar funds requiring a match by the grant recipient, are available to be matched using individual development account fund money, the amount necessary for the match may be placed in a reserve account that meets the requirements to draw down the AFIA or other funds.
(3) If certain funds are earmarked for a certain purpose, including, but not limited to, Community Development Block Grant (CDBG) funds, the authority shall create new accounts to keep these funds separate from the general individual development account fund pool.
(3) If an account owner is removed from the Individual Development Account program under Section 4(3) of this act, all matching funds accrued and the interest on matching funds shall revert to the fiduciary organization.
SECTION 13. Section 27-7-15, Mississippi Code of 1972, is amended as follows:
27-7-15. (1) For the purposes of this article, except as otherwise provided, the term "gross income" means and includes the income of a taxpayer derived from salaries, wages, fees or compensation for service, of whatever kind and in whatever form paid, including income from governmental agencies and subdivisions thereof; or from professions, vocations, trades, businesses, commerce or sales, or renting or dealing in property, or reacquired property; also from annuities, interest, rents, dividends, securities, insurance premiums, reinsurance premiums, considerations for supplemental insurance contracts, or the transaction of any business carried on for gain or profit, or gains, or profits, and income derived from any source whatever and in whatever form paid. The amount of all such items of income shall be included in the gross income for the taxable year in which received by the taxpayer. The amount by which an eligible employee's salary is reduced pursuant to a salary reduction agreement authorized under Section 25-17-5 shall be excluded from the term "gross income" within the meaning of this article.
(2) In determining gross income for the purpose of this section, the following, under regulations prescribed by the commissioner, shall be applicable:
(a) Dealers in property. Federal rules, regulations and revenue procedures shall be followed with respect to installment sales unless a transaction results in the shifting of income from inside the state to outside the state.
(b) Casual sales of property.
(i) Prior to January 1, 2001, federal rules, regulations and revenue procedures shall be followed with respect to installment sales except they shall be applied and administered as if H.R. 3594, the Installment Tax Correction Act of 2000 of the 106th Congress, had not been enacted. This provision will generally affect taxpayers, reporting on the accrual method of accounting, entering into installment note agreements on or after December 17, 1999. Any gain or profit resulting from the casual sale of property will be recognized in the year of sale.
(ii) From and after January 1, 2001, federal rules, regulations and revenue procedures shall be followed with respect to installment sales except as provided in this subparagraph (ii). Gain or profit from the casual sale of property shall be recognized in the year of sale. When a taxpayer recognizes gain on the casual sale of property in which the gain is deferred for federal income tax purposes, a taxpayer may elect to defer the payment of tax resulting from the gain as allowed and to the extent provided under regulations prescribed by the commissioner. If the payment of the tax is made on a deferred basis, the tax shall be computed based on the applicable rate for the income reported in the year the payment is made. Except as otherwise provided in subparagraph (iii) of this paragraph (b), deferring the payment of the tax shall not affect the liability for the tax. If at any time the installment note is sold, contributed, transferred or disposed of in any manner and for any purpose by the original note holder, or the original note holder is merged, liquidated, dissolved or withdrawn from this state, then all deferred tax payments under this section shall immediately become due and payable.
(iii) If the selling price of the property is reduced by any alteration in the terms of an installment note, including default by the purchaser, the gain to be recognized is recomputed based on the adjusted selling price in the same manner as for federal income tax purposes. The tax on this amount, less the previously paid tax on the recognized gain, is payable over the period of the remaining installments. If the tax on the previously recognized gain has been paid in full to this state, the return on which the payment was made may be amended for this purpose only. The statute of limitations in Section 27-7-49 shall not bar an amended return for this purpose.
(c) Reserves of insurance companies. In the case of insurance companies, any amounts in excess of the legally required reserves shall be included as gross income.
(d) Affiliated companies or persons. As regards sales, exchanges or payments for services from one to another of affiliated companies or persons or under other circumstances where the relation between the buyer and seller is such that gross proceeds from the sale or the value of the exchange or the payment for services are not indicative of the true value of the subject matter of the sale, exchange or payment for services, the commissioner shall prescribe uniform and equitable rules for determining the true value of the gross income, gross sales, exchanges or payment for services, or require consolidated returns of affiliates.
(e) Alimony and separate maintenance payments. The federal rules, regulations and revenue procedures in determining the deductibility and taxability of alimony payments shall be followed in this state.
(f) Reimbursement for expenses of moving. There shall be included in gross income (as compensation for services) any amount received or accrued, directly or indirectly, by an individual as a payment for or reimbursement of expenses of moving from one residence to another residence which is attributable to employment or self-employment.
(3) In the case of taxpayers other than residents, gross income includes gross income from sources within this state.
(4) The words "gross income" do not include the following items of income which shall be exempt from taxation under this article:
(a) The proceeds of life insurance policies and contracts paid upon the death of the insured. However, the income from the proceeds of such policies or contracts shall be included in the gross income.
(b) The amount received by the insured as a return of premium or premiums paid by him under life insurance policies, endowment, or annuity contracts, either during the term or at maturity or upon surrender of the contract.
(c) The value of property acquired by gift, bequest, devise or descent, but the income from such property shall be included in the gross income.
(d) Interest upon the obligations of the United States or its possessions, or securities issued under the provisions of the Federal Farm Loan Act of July 17, 1916, or bonds issued by the War Finance Corporation, or obligations of the State of Mississippi or political subdivisions thereof.
(e) The amounts received through accident or health insurance as compensation for personal injuries or sickness, plus the amount of any damages received for such injuries or such sickness or injuries, or through the War Risk Insurance Act, or any law for the benefit or relief of injured or disabled members of the military or naval forces of the United States.
(f) Income received by any religious denomination or by any institution or trust for moral or mental improvements, religious, Bible, tract, charitable, benevolent, fraternal, missionary, hospital, infirmary, educational, scientific, literary, library, patriotic, historical or cemetery purposes or for two (2) or more of such purposes, if such income be used exclusively for carrying out one or more of such purposes.
(g) Income received by a domestic corporation which is "taxable in another state" as this term is defined in this article, derived from business activity conducted outside this state. Domestic corporations taxable both within and without the state shall determine Mississippi income on the same basis as provided for foreign corporations under the provisions of this article.
(h) In case of insurance companies, there shall be excluded from gross income such portion of actual premiums received from an individual policyholder as is paid back or credited to or treated as an abatement of premiums of such policyholder within the taxable year.
(i) Income from dividends that has already borne a tax as dividend income under the provisions of this article, when such dividends may be specifically identified in the possession of the recipient.
(j) Amounts paid by the United States to a person as added compensation for hazardous duty pay as a member of the Armed Forces of the United States in a combat zone designated by Executive Order of the President of the United States.
(k) Amounts received as retirement allowances, pensions, annuities or optional retirement allowances paid under the federal Social Security Act, the Railroad Retirement Act, the Federal Civil Service Retirement Act, or any other retirement system of the United States government, retirement allowances paid under the Mississippi Public Employees' Retirement System, Mississippi Highway Safety Patrol Retirement System or any other retirement system of the State of Mississippi or any political subdivision thereof. The exemption allowed under this paragraph (k) shall be available to the spouse or other beneficiary at the death of the primary retiree.
(l) Amounts received as retirement allowances, pensions, annuities or optional retirement allowances paid by any public or governmental retirement system not designated in paragraph (k) or any private retirement system or plan of which the recipient was a member at any time during the period of his employment. Amounts received as a distribution under a Roth Individual Retirement Account shall be treated in the same manner as provided under the Internal Revenue Code of 1986, as amended. The exemption allowed under this paragraph (l) shall be available to the spouse or other beneficiary at the death of the primary retiree.
(m) Compensation not to exceed the aggregate sum of Five Thousand Dollars ($5,000.00) for any taxable year received by a member of the National Guard or Reserve Forces of the United States as payment for inactive duty training, active duty training and state active duty.
(n) Compensation received for active service as a member below the grade of commissioned officer and so much of the compensation as does not exceed the maximum enlisted amount received for active service as a commissioned officer in the Armed Forces of the United States for any month during any part of which such members of the Armed Forces (i) served in a combat zone as designated by Executive Order of the President of the United States or a qualified hazardous duty area as defined by federal law, or both; or (ii) was hospitalized as a result of wounds, disease or injury incurred while serving in such combat zone. For the purposes of this paragraph (n), the term "maximum enlisted amount" means and has the same definition as that term has in 26 USCS 112.
(o) The proceeds received from federal and state forestry incentives programs.
(p) The amount representing the difference between the increase of gross income derived from sales for export outside the United States as compared to the preceding tax year wherein gross income from export sales was highest, and the net increase in expenses attributable to such increased exports. In the absence of direct accounting the ratio of net profits to total sales may be applied to the increase in export sales. This paragraph (p) shall only apply to businesses located in this state engaging in the international export of Mississippi goods and services. Such goods or services shall have at least fifty percent (50%) of value added at a location in Mississippi.
(q) Amounts paid by the federal government for the construction of soil conservation systems as required by a conservation plan adopted pursuant to 16 USCS 3801 et seq.
(r) The amount deposited in a medical savings account, and any interest accrued thereon, that is a part of a medical savings account program as specified in the Medical Savings Account Act under Sections 71-9-1 through 71-9-9; provided, however, that any amount withdrawn from such account for purposes other than paying eligible medical expense or to procure health coverage shall be included in gross income.
(s) Amounts paid by the Mississippi Soil and Water Conservation Commission from the Mississippi Soil and Water Cost-Share Program for the installation of water quality best management practices.
(t) Dividends received by a holding corporation, as defined in Section 27-13-1, from a subsidiary corporation, as defined in Section 27-13-1.
(u) Interest, dividends, gains or income of any kind on any account in the Mississippi Affordable College Savings Trust Fund, as established in Sections 37-155-101 through 37-155-125, to the extent that such amounts remain on deposit in the MACS Trust Fund or are withdrawn pursuant to a qualified withdrawal, as defined in Section 37-155-105.
(v) Interest, dividends or gains accruing on the payments made pursuant to a prepaid tuition contract, as provided for in Section 37-155-17.
(w) Income resulting from transactions with a related member where the related member subject to tax under this chapter was required to, and did in fact, add back the expense of such transactions as required by Section 27-7-17(2). Under no circumstances may the exclusion from income exceed the deduction add-back of the related member, nor shall the exclusion apply to any income otherwise excluded under this chapter.
(x) Amounts that are subject to the tax levied pursuant to Section 27-7-901, and are paid to patrons by gaming establishments licensed under the Mississippi Gaming Control Act.
(y) Amounts that are subject to the tax levied pursuant to Section 27-7-903, and are paid to patrons by gaming establishments not licensed under the Mississippi Gaming Control Act.
(z) Interest, dividends, gains or income of any kind on any account in a qualified tuition program and amounts received as distributions under a qualified tuition program shall be treated in the same manner as provided under the United States Internal Revenue Code, as amended. For the purposes of this paragraph (z), the term "qualified tuition program" means and has the same definition as that term has in 26 USCS 529.
(aa) The amount deposited in a health savings account, and any interest accrued thereon, that is a part of a health savings account program as specified in the Health Savings Accounts Act created in Sections 83-62-1 through 83-62-9; however, any amount withdrawn from such account for purposes other than paying qualified medical expenses or to procure health coverage shall be included in gross income, except as otherwise provided by Sections 83-62-7 and 83-62-9.
(bb) Amounts received as qualified disaster relief payments shall be treated in the same manner as provided under the United States Internal Revenue Code, as amended.
(cc) Amounts received as a "qualified Hurricane Katrina distribution" as defined in the United States Internal Revenue Code, as amended.
(dd) Amounts deposited into or withdrawn from individual development accounts as provided in Section 7 of Senate Bill No. 2824, 2006 Regular Session.
(5) Prisoners of war, missing in action-taxable status.
(a) Members of the Armed Forces. Gross income does not include compensation received for active service as a member of the Armed Forces of the United States for any month during any part of which such member is in a missing status, as defined in paragraph (d) of this subsection, during the Vietnam Conflict as a result of such conflict.
(b) Civilian employees. Gross income does not include compensation received for active service as an employee for any month during any part of which such employee is in a missing status during the Vietnam Conflict as a result of such conflict.
(c) Period of conflict. For the purpose of this subsection, the Vietnam Conflict began February 28, 1961, and ends on the date designated by the President by Executive Order as the date of the termination of combatant activities in Vietnam. For the purpose of this subsection, an individual is in a missing status as a result of the Vietnam Conflict if immediately before such status began he was performing service in Vietnam or was performing service in Southeast Asia in direct support of military operations in Vietnam. "Southeast Asia," as used in this paragraph, is defined to include Cambodia, Laos, Thailand and waters adjacent thereto.
(d) "Missing status" means the status of an employee or member of the Armed Forces who is in active service and is officially carried or determined to be absent in a status of (i) missing; (ii) missing in action; (iii) interned in a foreign country; (iv) captured, beleaguered or besieged by a hostile force; or (v) detained in a foreign country against his will; but does not include the status of an employee or member of the Armed Forces for a period during which he is officially determined to be absent from his post of duty without authority.
(e) "Active service" means active federal service by an employee or member of the Armed Forces of the United States in an active duty status.
(f) "Employee" means one who is a citizen or national of the United States or an alien admitted to the United States for permanent residence and is a resident of the State of Mississippi and is employed in or under a federal executive agency or authority of the Armed Forces.
(g) "Compensation" means (i) basic pay; (ii) special pay; (iii) incentive pay; (iv) basic allowance for quarters; (v) basic allowance for subsistence; and (vi) station per diem allowances for not more than ninety (90) days.
(h) If refund or credit of any overpayment of tax for any taxable year resulting from the application of subsection (5) of this section is prevented by the operation of any law or rule of law, such refund or credit of such overpayment of tax may, nevertheless, be made or allowed if claim therefor is filed with the State Tax Commission within three (3) years after the date of the enactment of this subsection.
(i) The provisions of this subsection shall be effective for taxable years ending on or after February 28, 1961.
(6) A shareholder of an S corporation, as defined in Section 27-8-3(1)(g), shall take into account the income, loss, deduction or credit of the S corporation only to the extent provided in Section 27-8-7(2).
SECTION 14. This act shall take effect and be in force from and after July 1, 2006.